Sbarro Inc. filed an amended reorganization plan Friday that aims for the company to exit bankruptcy before year’s end.
Under the revised plan, which was filed in a New York bankruptcy court, the company will significantly reduce its net debt load in a debt-for-equity swap with lenders in the reorganized company. Lenders have also agreed to provide $35 million in new capital to allow the company to continue turnaround efforts.
Key terms of the amended plan include:
• Converting up to $35 million of outstanding loans under the company’s debtor-in-possession facility into new first-out rollover term loans, which, together with the new money term loans of up to $35 million, will comprise the “First-Out Exit Term Loan Facilities” of the reorganized company.
• Converting a portion of the prepetition first lien credit facility into a $75 million “last-out” exit term facility.
• Converting the remaining roughly $100 million in secured indebtedness outstanding under the prepetition first lien credit facility into substantially all of the common equity of the reorganized Sbarro.
• Eliminating all other outstanding debt.
Sbarro, which operates about 1,000 restaurants in 40 countries, filed for Chapter 11 bankruptcy in April. The chain, which operates a number of units in shopping malls, suffered as retail traffic dropped during the recession.
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Nicholas McGrane, interim president and chief executive of Sbarro, said the Italian quick-service chain’s same-store sales have increased year-to-date, including improvements in the third quarter.
The fourth quarter is typically the chain’s busiest, and the company said it expects to generate positive cash flow before the end of 2011.
McGrane said the company has also been improving lease terms in some locations, and the chain has closed underperforming restaurants.
A spokesman for the company said about 25 company-owned locations have shuttered since the bankruptcy was filed.
Previously, the court had also approved a bidding process to allow other interested buyers to top the original plan, which included a $110 million “take-back” exit facility and new money commitments of up to $18.6 million.
Sbarro officials said there was some interest, but the company decided not to hold an auction, saying in statement that the revised plan was the “best way forward.”
A hearing on the changes is scheduled for Oct. 11, the Melville, N.Y.-based company said. If approved, the company will solicit votes on the plan, which it expects to confirm on Nov. 17.
Sbarro is owned by private-equity firm MidOcean Partners.
Contact Lisa Jennings at [email protected].
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